Madison, N.J.-based Prudential has agreed to acquire the project at 150 W. Roosevelt Road from a joint venture led by Chicago developer Dan McCaffery, according to people familiar with the transaction. Separately, the McCaffery venture is selling a development parcel behind the Roosevelt Collection to Wood Partners, an Atlanta-based developer, these people say.

It's unclear how much McCaffery and his partner, Los Angeles-based Canyon-Johnson Urban Funds, will clear in the sales. But it's safe to say the price will be a lot higher than the $160 million they paid for the Roosevelt Collection four years ago, when the real estate market was still in the early stages of recovering from the crash.

Not only have they leased up most of the property's 330,000 square feet of retail space, which was about 75 percent vacant at the time, but real estate values, especially for apartments, have soared in the past several years.

'TIMING WAS PERFECT'

“McCaffrey deserves a great deal of credit for buying at a recovery inflection point and holding on as the South Loop markets strengthened,” Greg Mutz, CEO of Amli Residential, a Chicago-based apartment developer that recently built a 398-unit project nearby, wrote in an email. “Timing was everything and Dan's timing was perfect.”

McCaffery, chairman and CEO of McCaffery Interests, declined to comment, as did Prudential and Canyon-Johnson, whose partners include former NBA star Earvin “Magic” Johnson. Wood Partners executives did not return calls, nor did an executive at Chicago-based Moran & Co., the brokerage selling the property.

The Roosevelt Collection serves as something of a real estate investing case study, showing how different types of investors can make and lose large amounts of money as the market rises and falls. The project's developer, Centrum Properties, broke ground in 2007, just as the real estate market was peaking. It borrowed $285 million to finance the project, which included 342 condominiums.

Yet the market was vastly different when Centrum finished construction a few years later. Unable to sell the condos, Centrum was able to rent them out instead. But retailers that had signed leases in the project bailed out, leaving its shopping space empty except for a 16-screen movie theater.

Enter McCaffery. With the consent of its lenders, Centrum put the property up for sale in late 2010, and closed on the $160 million sale to the McCaffery venture in June 2011. Centrum lost all its equity in the sale, and its lenders took huge losses as well.

“Roosevelt Collection started construction in retrospect at the worst possible time and then went through the wringer of the 2008-'10 financial meltdown,” Mutz wrote. “Dan McCaffrey and team were there to pick up the property in a bank sale at an attractive price, which was well below replacement cost. We took a look but couldn't pull the trigger.”

DREW RETAILERS, BRITISH SCHOOL

Amid an improving economy, McCaffery has attracted retailers including Banana Republic, Lululemon and the Container Store to the Roosevelt Collection's retail space, which is 93 percent leased, according to CoStar Group. The booming apartment market has also lifted the value of the project's multifamily component. In addition, McCaffery recruited the British School of Chicago to build a new campus on a site just north of the shopping center. The school will open this fall.

Now, McCaffery and Canyon-Johnson are ready to be rewarded handsomely for the risk they took, turning over the property to Prudential, an investor willing to own a stabilized property that offers a lower return but less risk than it did just a few years ago.

Yet the emergence of the South Loop as a residential neighborhood represents both an opportunity and a challenge for the Roosevelt Collection. An opportunity, because developers plan thousands of new homes in the area, and the people who live in them will shop in its stores. A challenge, because many of the new residential towers in the works will compete with the Roosevelt Collection for tenants.